Hostess Wins Final Court Approval to Wind Down

By Phil Milford -
Nov 29, 2012

Hostess Brands Inc., maker of
Twinkies and Wonder Bread, won final court approval to sell its
assets and eliminate about 18,000 jobs in a liquidation that an
adviser said has drawn “fast and furious” interest from
potential buyers.

U.S. Bankruptcy Judge Robert Drain, at a hearing today in
White Plains, New York, approved Hostess’s requests to shut down
and to pay as much as $1.83 million in incentives to 19 senior
managers, while overruling objections to the bonuses.

The sale process should “move quickly,” Drain said. He
gave interim approval for the company’s wind-down plan Nov. 21.

Hostess is in active talks on asset sales with 110 parties,
financial adviser Joshua Scherer of Perella Weinberg Partners LP
told the judge today. Some of the would-be buyers are “large
companies” with recognizable names, and some have hired
investment bankers and are evaluating company data, Scherer
added.

Hostess’s asset sales may generate about $1 billion,
Scherer estimated last week. The company was worth $450 million
in 2011, David Rush, the baker’s interim treasurer, told Drain
today. The 2011 estimate should be reevaluated because of
potential buyers’ interest in the company’s brands and
intellectual property, Rush noted.

“We are very pleased with today’s outcome because it
provides certainty to our employees and potential bidders that
we are moving forward with the sale of our assets,” Tom Becker,
a Hostess spokesman, said in an e-mailed statement.

Second Filing

Hostess, based in Irving, Texas, sought court protection in
January, listing assets of $982 million and debt of
$1.43 billion. The 82-year-old maker of Hostess Ding Dongs, Ho
Hos and Sno-balls endured years of declining sales as consumers
switched to healthier foods or migrated to other brands of
snacks and breads, while increases in labor and supply costs
further crimped profit.

Hostess filed Chapter 11 papers for the second time in
January, less than three years after completing a restructuring
that spanned 4 1/2 years.

The company, then known as Interstate Bakeries Corp., first
sought court protection in its former hometown of Kansas City,
Missouri, in 2004 blaming stiffer competition and higher prices
for raw materials. Interstate left bankruptcy in February 2009
under the control of lenders and buyout firm Ripplewood Holdings
LLC. It changed its name to Hostess Brands in October 2009,
according to Bloomberg data.

Retiree Benefits

The baker blamed the latest bankruptcy filing on a weak
economy and costs tied to pensions and health-care obligations.
The company’s decision to liquidate followed a weeklong strike
by its bakery workers’ union that began after Drain imposed
contract concessions opposed by more than 90 percent of the
union’s members.

During today’s hearing, a Hostess lawyer told Drain that
the baker won’t be able to provide retiree benefits to some
former employees.

Heather Lennox, the Hostess attorney, said the company
would cut $1.1 million a month slated for the pensioners. Drain
approved formation of a Committee of Retired Employees to
safeguard retirees’ rights during the liquidation.

The case is In re Hostess Brands Inc., 12-22052, U.S.
Bankruptcy Court, Southern District of New York (White Plains).